Proposition 173 would have replaced the First-Time Home Buyers Act of 1982 with a new mortgage insurance program for first-time home buyers. It would have allowed the California government to sell $185 million in authorized, but unsold, bonds remaining under the First-Time Home Buyers Act of 1982 in order to provide funding for the new program.

Election results

Proposition 173

Result

Votes

Percentage

dNo

2,791,573

57.8%

Yes

2,037,804

42.1%

Text of measure

This act establishes a comprehensive program to address the severe housing crisis in California by authorizing the issuance of bonds, requires the proceeds of the bonds to be deposited into the California Housing Loan Insurance Fund for the purpose of providing mortgage guaranty insurance for low and moderate income first-time home buyers pursuant to Part 4 (commencing with Section 51600) of Division 31 of the Health and Safety Code, and requires the repayment of General Fund costs from program revenues in excess of required program costs and reserves.

The net fiscal effect of this measure on the state is equal to the state's direct cost of paying off the bonds, offset by repayments from the CHFA for the state's debt service costs.

Direct Cost of Paying Off the Bonds. The cost of paying off the bonds would depend, in part, on whether the interest on the bonds is subject to federal income taxation. If the authorized bonds are sold on a federal income tax-exempt basis at an average interest rate of about 6 percent, the cost would be about $300 million to pay off both the principal ($185 million) and interest ($115 million). The average payment would be about $15 million annually for 20 years. If the bonds are subject to federal taxation, the total cost of paying off the bonds would be somewhat higher.

Repayment of General Fund Costs. The measure requires the CHFA to set its insurance premiums at a level that will cover its program expenses, including debt repayment. To the extent that the premium rates generate sufficient revenues to offset these costs, then there would be no fiscal effect on the state from adoption of this measure. If not, the state would experience net costs.